24 November 2009 | Allie Anderson
Closer collaboration with suppliers is expected to be a business practice that continues after the recession has ended.
According to the Confederation of Business Industry (CBI), "a more collaborative, less transactional world" where "closer relationships with customers, suppliers and shareholders look like becoming the new norm" is anticipated.
The report, The Shape of Business - The Next 10 Years, released to coincide with the CBI's annual conference this week, said the recession had become a "catalyst for a decade of business change". It highlighted the need for companies to "re-examine their approach to working with partners" as one of the key themes that will develop from of the downturn.
Concerns over a "domino effect" of supply chain failures and the difficulties suppliers face securing trade credit insurance is expected to encourage firms to work together with vendors and develop stronger relationships. This will in turn help buyers gain greater control over ongoing risks and uncertainties as well as supporting greater efficiency in the supply chain, the report said.
Moreover, larger firms may be more willing to finance their suppliers where mutual trust and a stronger partnership had been established. The report said: "Finance agreements in the supply chain are now perceived by many businesses as less risky than bank lending - as customers, large businesses will have a very good understanding of suppliers' peaks and troughs in demand, and they will also be willing to work with them to ensure their survival."
Richard Lambert, director-general of the CBI, said: "We may be at the start of a new era for businesses. There are important questions around how businesses are going to finance growth and investment in the future. And in a more collaborative, less transactional world, closer relationships with customers, suppliers and shareholders look like becoming the new norm."
The report follows MORI research, conducted in October and November and sponsored by CBI and business advisory firm Deloitte, which unveiled a shift in attitudes towards financing and supply chains. Just 24 per cent of business leaders surveyed said they were not concerned about the fragility of their supply chain as the economy recovers. Instead, the issues causing most worry were key or specialist suppliers going out of business, a supplier's own supply chain collapsing and vendors being unable to secure working capital.
Strengthening collaborative relationships with suppliers was consequently a priority for 68 per cent of those surveyed. Almost a third (30 per cent) of respondents said they would be increasing their supplier base in order to minimise risk, while one in five said they would offer finance to key suppliers to help them stay afloat.
